Company A is a construction company and is a new audit client ofyour firm. It has never been audited but a different accountingfirm performed a review engagement for y/e 31 Dec 2016. Your firmis auditing A’s financial statements for y/e 31 Dec 2017.

Company A is privately owned by the Jones family in Country X,using the X$ currency. The president, VP, secretary/treasurer,controller and various levels of managers are all familymembers.

All management employees who must travel to job sites (including9 family members) are assigned company-owned cars for theirpersonal use. The company has a total of 80 company cars. Employeeshave access to these cars at all times, and the cars do not need tobe returned to the company parking yard except for periodicservicing.

The company also owns vans and trucks that are used by variouscompany employees to transport equipment, supplies, labour, andmaterial to and from job sites. These vehicles are stored at thecompany facilities when not in use and are never available forpersonal use.

The company also has a number of special-use heavy vehicles thatare used at job sites and stored at the job site or in the parkingyard of the company.

As part of the 2017 audit, you have been assigned the task ofauditing fuel expense. The general ledger fuel expense accountshows X$317,224. According to the client, the 2016 figure wasX$375,542.

Your audit manager has asked you to perform some form ofanalytical procedure on fuel expense. Company A’s staff hasgathered the following information for you:

Type of Vehicle	No.	Fuel Usage (miles per gallon)	Miles or Usage
Small cars	60	20 mpg	21,000/each
Large cars	20	10 mpg	25,000/each
Pickup trucks	45	8 mpg	19,000/each
V ans	35	7 mpg	9,500/each
Flatbed trucks	6	4 mpg	6,500/each
Dump trucks	5	3 mpg	7,300/each
Loaders	3	3 gallon/hr	Unknown**
Bulldozers	4	6 gallon/hr	Unknown**
Graders	2	5 gallon/hr	69 person-days*
Scrapers	1	6 gallon/hr	80 person-days*

Other information:
Cars and pickup trucks run on petrol, which has averaged$3.05/gallon during 2017. All other vehicles use diesel. You havedetermined the typical diesel price increases during 2017 asbelow.
* 1 person-day = 8 hours
** According to the construction foreman, these are in continualusage every day a job is in progress. The company has beenextremely busy but crews do not work overtime or weekends

Date	Price of diesel per gallon in X$
1/Jan/17	2.90
1/Mar/17	2.94
1/Jun/17	2.99
1/Nov/17	3.05

Required:

1. What is (are) the primary management assertion(s) related tofuel expense in this case?

2. What is your team’s $ value estimate for Company A’s fuelexpense for 2017?

3. What is your conclusion – is the client’s fuel expensemisstated (over/under-stated)? Why/why

not? Do you recommend a correcting journal entry be putthrough?

4. What further information would you need to assist you inarriving at a conclusion for

Requirement 2?